1. Ad hoc and institutional arbitration in Italy

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1 HOT TOPICS IN INTERNATIONAL ARBITRATION AND INTERNATIONAL LITIGATION NYSBA International Section Seasonal Meeting 2014 Vienna, Austria Program 15 Friday, October 17 th *** Donato Silvano Lorusso *** INTERNATIONAL ARBITRATION IN ITALY 1. Ad hoc and institutional arbitration in Italy Italian Rules on arbitration are contained inthe Italian Code of Civil Procedure (c.p.c.), at Section VIII, articles 806 to 840, as well as in a number of multilateral and bilateral conventions ratified by the Italian Government, such as the 1958 New York Convention on Recognition and Enforcement of Foreign Awards, the 1961 European Convention on International Arbitration, and the 1965 Washington (ICSID) Convention. Italian law introduces the classical distinction between ad hoc and administered arbitration and, as far as arbitration agreements are concerned, between the arbitration clause (in Italian, clausola compromissoria) and the agreement to submit to arbitration disputes which have already arisen between the parties (compromesso). Moreover, besides traditional arbitration (arbitrato rituale), Italian law also admits a peculiar kind of arbitration (arbitrato irrituale), in which awards do not have the nature of a judgment but rather of a contractual settlement. The Italian arbitration rules have experienced two wide reforms, the first in 1994 and the second in The latter is particularly important for our purposes since it repealed the former distinction between domestic and international arbitration. The only remnant of that distinction can be found in the provision of article 830, according to which, whenever the dispute arises from a subjectively international contract, the Court of Appeal requested to annul an arbitral award may directly decide the merits of the case only if required by all the parties. This reform also affected the consistency of the Italian arbitration with the UNCITRAL model, that adopts the bifurcated approach towards domestic and international arbitration. The new arbitration regulation has also clarified some important features, such as arbitrability, form and scope of the arbitration agreement, rights and duties of the arbitrators. The reform seems to meet the customers needs and this is confirmed by the always growing numbers of cases submitted to arbitral tribunals in Italy. International arbitration (i.e. arbitration regarding an international dispute but with its legal seat in Italy) must, of course, be distinguished from foreign

2 arbitration, more precisely, from arbitral awards rendered abroad. Articles 839 and 840 c.p.c. regulate recognition and enforcement of such awards, along the lines of the 1958 New York Convention. According to the provisions of the Italian Civil Code of Procedure, mandatory rules, applicable to any kind of arbitration, include the equal treatment of the parties, their right to be heard and the principle of due process in general (the so-called contraddittorio). Most remaining procedural rules contained in the c.p.c. are not mandatory. For example, no particular procedural steps are required by law, the only relevant provision being the one concerning the length of the procedure (pursuant to article 820, the arbitral awards must be rendered within two hundred and forty days from the date of constitution of the arbitral tribunal, although even this time limit can be modified by the parties or extended by the President of the court upon reasoned request of a party or the arbitral tribunal). Effectively, we can mention the general principle (article 816-bis) that allows the parties, or, failing them, the arbitral tribunal, to freely establish the rules governing the proceedings. Most of the rules and principles set forth by the Italian legislation concern the role and office of the arbitrators. Particularly, the arbitrators must treat the parties equally, and must be and remain independent and impartial throughout the entire proceeding. Arbitrators have to conduct the procedures in an efficient and expeditious manner. When an arbitrator fails to perform his or her duties in a timely manner, each party may ask for his or her removal (article 813-bis). Moreover, other duties may be inferred a contrariis from article 813-ter c.p.c. on arbitrators liability. Finally, further contractual duties may be imposed upon arbitrators by the rules of arbitration institutions or by concrete arbitration agreements. The Italian legislation contemplates only two mandatory requirements for an arbitration agreement (article 807): it must be in writing ad substantiam; and it must clearly determine the subject matter of the dispute. The arbitration clause in writing can also be appended to, rather than inserted in, the contract involved, and always has the legal effect of excluding the jurisdiction of the courts. Article 809 c.p.c. establishes that the arbitration agreement must then contain the appointment of the arbitrators or, at least, establish their number and the manner in which they are appointed (expressly or by incorporation of the Rules of a given centre of administered arbitration). The arbitral tribunal must consist of an odd number of arbitrators; when the arbitration agreement indicates an even number, the additional arbitrator will be appointed, unless the parties have agreed otherwise, by the President of the court where the arbitration has its seat, or, if no seat has been established, of the place where the agreement has been concluded, or if such place is abroad, by the President of the Rome First Instance Court.

3 Obviously, especially in international arbitration agreements, it is advisable to define in the clause both the place and the language of arbitration and the law applicable to the dispute. 2. The Milan Chamber of Arbitration Institutional Arbitration can be administered by different entities in Italy, but the prominent role in this field is played by the Chambers of Commerce: effectively, they receive more than 70% of the annual arbitration proceedings. Among the Chambers, particular interest must be reserved for the Milan Chamber of Arbitration: a special agency of the local Chamber of Commerce, founded in 1987 and since then active in the field of mediation and national and international arbitration. By looking at the statistics concerning arbitration in Italy, the data of this entity surely emerge as brilliant. First of all, it is the Chamber that administered the highest number of procedures: 138 in 2012 (equal to the 18,5% of all Italian proceedings) and 167 in 2013, with a registered increase of the 21%. The arbitration proceedings managed by the Chamber of Milan also present the highest medium value: in 2013 ( in 2012). When it comes to international arbitration figures, nowadays in Italy more than 90% of the procedures are administered by the Chambers of Commerce; the Arbitration Chamber of Milan is prominent in this field too, with its 25 international arbitrations in 2011 and 33 in Therefore, the Milan Chamber of Arbitration has acquired a prominent role, not only in Italy but also internationally, among institutions that offer Alternative Dispute Resolution services and which sustain and promote its purpose. In particular, the Chamber is a board member of the International Federation of Commercial Arbitration Institutions, is a reference point for the Institute for Transnational Arbitration, is an active member of the World Forum of Mediation Centres, hosts the annual meeting of the Club of Arbitrators of the CAM, an association of highly regarded experts and practitioners of international repute. Furthermore, the Club participates in the work of the UNCITRAL (United Nations Commission on International Trade Law), which is active in international arbitration matters. The success of the Chamber of Arbitration of Milan can be traced back to its wide net of partnerships with other Chambers and Mediation Entities, spread across the entire national territory thus granting the right promotion to local realities. Also, the Chamber offers the parties and the arbitrators support in the organisation of the proceedings: hearings, that can take place in the Chamber premises, are organised by the Secretariat, who also provides for assistance in the drafting of the minutes of such hearings.

4 Another key factor is to be found in the Chamber Rules of Procedures, which present the simultaneous advantages of being technically well composed, flexible and easily amendable. The 2010 version of the Rules provides for a high recognition of the parties freedom, as they are able to decide the language of the proceeding, the applicable law, the seat, the place of the hearings, the number of arbitrators, while the institution maintains control of the independence and impartiality. 3. The enforcement and appeal of national and foreign arbitration awards in Italy Under Italian law, the arbitral award is binding on the parties of the date of its signature by the arbitrators, in the same way as it is a judgment of a national court. The new article 824-bis provides that: The arbitral award has as of the date of its last signature by the arbitrators the same effects of a judgment rendered by a national court. The issues decided by the award are thus covered by res judicata and may not be reheard by a national court. In order to execute the award within the Italian territory, the party who wishes to have the award enforced must present an application in front of the Tribunal of the place where the arbitration was set, depositing the award together with the original act containing the arbitration agreement. According to article 825 of the cpc, with regard to arbitral awards rendered in Italy, Italian courts shall only verify the presence of all the formal requirements enlisted in the Code of Civil Procedure. In 1968, Italy ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The matter is presently regulated by articles 839 and 840 c.p.c. which also apply to non-conventional foreign awards. Whoever wants a foreign award to have effect in Italy must file a petition with the President of the relevant Court of Appeal. The President, after ascertaining that the award complies with formal requirements, that the dispute is arbitrable under Italian law and that the award is not contrary to Italian public policy, orders recognition and enforcement. This order becomes final if no objections are raised within 30 days, based on the grounds set out in article 840 cpc, coinciding with those provided for by article V of the New York Convention. The final decision of the Court of Appeal may be challenged before the Court of Cassation on limited grounds. With reference to foreign arbitral awards, articles c.p.c. (derived from Art V(2)(b) of the NY Convention) stipulate that when the recognition and enforcement of an arbitral award have been sought or during the appellate proceedings against recognition, the competent judge may refuse (or respectively cancel) recognition and enforcement, also ex officio, should he/she decides that such recognition and enforcement would be contrary to public policy. Besides extremely rare cases of patent violations of constitutional or criminal norms, conflicts with public policy have been occasionally found, or could be found, when an award breaches fundamental principles of EU law (e.g.

5 antitrust law) or of national legal order, such as the principle of proportionality of compensation to the actual damage, in case of a foreign award granting punitive damages. Coming to the appeal procedure for arbitration awards, the Italian Civil Code of Procedure devotes to the subject articles 827 to 831. Arbitration awards can be challenged before the Court of Appeal of the place where the arbitration took place on three different grounds: nullity, revision and third party opposition. A very recent study, currently under publication, of a researcher from Bocconi University School of Law (Milan) analyzed the theoretical and empirical aspects of the procedure of arbitration awards appeal in Italy. In order to give a comprehensive outlook on arbitration in Italy the statistical figures emerging from the research are particularly interesting. The paper focuses on the activity of four Courts of Appeal (Milan, Brescia, Genoa and Turin), together representing a percentage of the national data that varies from the 25% of 2010 to the 18% of As of today, 15% of the national pending procedure are under judgment in front of the four abovementioned Tribunals; also in this respect, the prominent role of the city of Milan emerges, given that Milan Court of Appeal alone administers 11% of the national procedures. Having previously talked about the difference among ad hoc and administered arbitration, it could be interesting to point out the result of the analysis showing that only 8% of the appealed awards defined administered procedures, while the remaining 92% concerns the ad hoc arbitration. The main reason for that can be found in the circumstance that administered arbitration features the presence of the institutional entity whose task, among the others, is to continuously check the compliance of the procedure to the legal provisions, thus preventing potential grounds for the appeal. Furthermore, the administered arbitration award is substantially more largely accepted by the parties and this could be traced back to the subjects belief that the arbitrators chosen by the institution are generally more diligent and competent. Moreover, the research addresses the general approach of the four Courts towards arbitration procedures through the analysis of their upheld rate. The collected data (Brescia and Milan Courts upheld 0% of the filed appeals, 7% is the data in Genoa and 13% in Turin) evidence a homogeneous trend, apparently leading to an overall acceptance of arbitral tribunals practices. The same conclusion is drafted by the author of the paper, who interprets the studied data as a sign of the propensity of the Italian judicial system to encourage and support arbitration as the alternative means of solving disputes. 4. Conclusions As you could see by what I shared with you today, even in Italy we can claim to have achieved a considerable degree of familiarity with arbitration. In general

6 terms, the ever-increasing number of arbitrations (both administered and ad hoc) and the interest of the legislator and of the organs of forensic selfgovernment unequivocally demonstrate that this alternative disputed resolution method is becoming increasingly popular. The reasons for the growing success of the arbitration in Italy are various and very different. Firstly, we cannot avoid mentioning the cumbersome nature of the Italian traditional judicial system, whose unfortunate distinctive feature lies in the length of the proceedings. Even though the recent law introducing in the telematic civil proceeding should cause a rapid improvement in these data. In this regard, one of the next issues of the New York International Chapter News will feature a paper I wrote analyzing the main novelties introduced by the reform. But this is just one of the reasons of a success whose key factors are to be found in certain absolute strengths of arbitration procedures. Among those, we can for example recall the more quick decisions, the certainty of the proceedings time, the degree of effectiveness of arbitration awards, the proficiency and expertise of the arbitrators. All of these values guarantee that arbitral tribunals are able, like the traditional ones, to ensure that a right justice is implemented. It is my belief that the specific issues addressed today confirm this; particularly, the approach of Italian Courts of Appeal towards the enforcement and appeal of arbitration awards are to be interpreted as a corroboration of alternative dispute resolution methods in general and of the practice of arbitral tribunal in particular.